McDonald's Corp global comparable sales tumbled 22.2 percent in March and the burger chain pulled its full-year forecast as coronavirus-related lockdowns forced it to shutter stores and stick to delivery or take-out.
The company, one of the first major quick-service chains to provide a glimpse into the economic impact of the health crisis, said on Wednesday it had raised 6.5 billion U.S. dollars in the quarter and suspended share buybacks to bolster its cash reserves.
It provided the update, including quarterly sales results, ahead of its planned earnings announcement on April 30.
In March in the United States, when COVID-19 cases began to skyrocket, McDonald's sales fell 13.4 percent as authorities asked people to stay home and required dining rooms to shutter to curtail the spread of the virus.
It has now infected more than 1.3 million and killed over 81,000 globally.
Delivery couriers practice social distancing while waiting for orders at a McDonald's open for take-away following the implementation of stricter social-distancing and self-isolation rules to limit the spread of the coronavirus disease in Sydney, Australia, April 6, 2020. /Reuters
About 75 percent of McDonald's 38,000 restaurants around the world were operational during the quarter, the majority of which adapted to focus on drive-thru, delivery or take-away, Chief Executive Officer Chris Kempczinski said.
"This unprecedented situation is changing the world we live in, and we will need to adapt to a new reality in its aftermath," Kempczinski said in a statement.
The steep drop in March led to a 3.4 percent fall in comparable sales for the three months ended March 31 globally, compared with the 0.91 percent drop analysts on average had expected, according to IBES data from Refinitiv.
However, a few of the brokers surveyed by Refinitiv had not updated their estimates to include the impact of the coronavirus in the consensus.
Still, Wall Street analysts said strong sales at the start of the quarter, when global same-store sales rose 7.2 percent, could mean the company may soon recover.
"The business update implies McDonald's is well-positioned for an eventual recovery following Jan/Feb momentum," said BMO Capital Markets analyst Andrew Strelzik.
McDonald's said it would defer rent and royalties for its franchisees, who are already facing difficulties due to the outbreak and are burdened with other expenses like restaurant renovations as a part of the company's push to modernize stores.
The company said it expects to reduce capital expenditures by about 1 billion U.S. dollars for 2020 due to fewer store renovations in the United States and fewer restaurant openings around the world.
McDonald's said the cancellation of its Worldwide Owner/Operator Convention due to the health crisis could cost about 40 million U.S. dollars due to refunds.
The Chicago-based company's shares closed nearly 2 percent higher amid a bounce in the broader market.
Starbucks sees 47% drop in second-quarter earnings
On the same day, Starbucks Corp forecast a 47 percent drop in second-quarter earnings, scrapped its full-year forecast and warned that the financial hit from the COVID-19 pandemic would extend into the final quarter of the fiscal year 2020.
A staff member wearing a protective face mask is seen at a Starbucks shop, after the Japanese government announced the state of emergency for the capital city following an outbreak of the coronavirus disease in the country, in Tokyo, Japan, April 8, 2020. /Reuters
The coffee brand said it would temporarily suspend its share buyback program and take steps to cut costs, but would maintain its quarterly dividend.
Starbucks said it now expects to report second-quarter earnings of about 28 cents per share, reflecting the impact of lost sales for the period as well as higher costs. It had reported 53 cents per share in the year-earlier period.
The world's largest coffee chain said same store sales in the United States began to decline on March 12 and have steadily worsened.
The company also said revenue in China faced a shortfall of about 400 million U.S. dollars compared with its expectations, with a 50 percent decline in comparable store sales for the second quarter ended March.
Like most other restaurants, Starbucks had to close its cafe areas and move operations to drive-thru, carry out and delivery only in response to customer concerns and government mandates to help stop the spread of the deadly virus by limiting social contact.
The company expects to report its second-quarter earnings on April 28.
(With input from Reuters)